Market regulators bay for Oakbay's blood

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File: Indian businessmen, Ajay Gupta and younger brother Atul Gupta and Oakbay MD Jagdish Parekh at a Business Day interview in Johannesburg on 2 March 2011, regarding their professional relationships.

File: Indian businessmen, Ajay Gupta and younger brother Atul Gupta and Oakbay MD Jagdish Parekh at a Business Day interview in Johannesburg on 2 March 2011, regarding their professional relationships.

web_photo_Ajay_Atul_Gupta_Oakbay_050617

File: Indian businessmen, Ajay Gupta and younger brother Atul Gupta and Oakbay MD Jagdish Parekh at a Business Day interview in Johannesburg on 2 March 2011, regarding their professional relationships.

File: Indian businessmen, Ajay Gupta and younger brother Atul Gupta and Oakbay MD Jagdish Parekh at a Business Day interview in Johannesburg on 2 March 2011, regarding their professional relationships.

JOHANNESBURG - The executives of Gupta-owned company Oakbay Resources should personally face fraud charges, market-regulation experts said on Friday. 

This was in reaction to the allegations that the company’s share price was manipulated when it listed on the Johannesburg Stock Exchange (JSE).

Oakbay Resources also missed a deadline on Thursday to pay back a loan of nearly R300-million to the Industrial Development Corporation (IDC), which now intends to sue the company.

The company already faces a long list of possible transgressions that could land it in hot water with the Financial Services Board (FSB) and law enforcement agencies.

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When it listed in November 2014, a Singaporean entity was allegedly funded by the Gupta family to buy shares in Oakbay Resources to inflate the share price.

“The FSB has to investigate what amounts to share manipulation and that process must take its course, and that should include both civil and criminal action," said market listing and regulation expert Melanie de Nysschen.

"There was potential manipulation and breach of warranties involved.” 

The IDC is heading to court for an immediate repayment of a R250-million loan it issued to Oakbay in 2010, with interest. The loan had been converted into Oakbay shares.

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“The problem here is that when you buy a share in a company or, in this case, – if you convert equity or cash into a share, that share must on the face value of it represent a percentage of the value of the company. The only reason you would inflate your market capitalisation is if you were using that market value to accomplish something else,” said De Nysschen.

In June, the company announced its cash reserves were running significantly low at only R2.7-million.

This means a fine, or lengthy legal procedures, could financially cripple the cash-strapped entity.